Search Share Prices
Britvic outlook 'more positive', Berenberg upgrades
With Britvic's first-half performance highlighting a number of promising trends, analysts at Berenberg felt the overall outlook for the drinks maker was becoming "more positive" and deserved an upgrade to its recommendation.
Berenberg said that Britvic's UK carbonates division has been successful at maintaining its momentum heading into the soft drinks tax and that its British stills business was also showing signs of improvement as the firm continued to focus on underlying margin expansion, but noted that some divisions remained "relatively subdued".
"We continue to believe that Britvic's portfolio is well positioned for the recently introduced soft drinks tax and note that Pepsi, in particular, could benefit if the levy leads to an accelerating shift to low-sugar drinks as its no-added-sugar variants command significantly more share than its full-sugar product," Berenberg said.
Having been affected by acquisitions of lower-margin businesses and FX headwinds over the past two years, Britvic began generating EBIT margin expansion again throughout the first half of 2018, something the broker warned would be affected by the dynamics of the soft drinks levy.
Berenberg forecast Britvic's EBIT margin to increase 60bp to 14.1% in 2020.
With the benefits of Britvic's business capability programme starting to come through and the group's free cash flow set to increase substantially from 2019, the broker increased its price target from 725p to 900p and upgraded its stance on the stock from 'hold' to 'buy'.